You Shall Not Lie: Manufacturer Pays $11.5 Million for Causing Clients to Make False Statements

At Centre, we are often asked to advise on a number of compliance issues contractors face. While GSA schedule compliance, Trade Agreement Act (TAA) certification, or Service Contract Act employment issues all raise eyebrows, one law rules them all – The False Claims Act (FCA). Compliance with the FCA can be rather simple according to a recent statement by the Justice Department. “The basic legal rule in this area could be mastered by a third-grader: Don’t lie.” – U.S. Attorney John F. Bash for the Western District of Texas.

Respectfully, it’s not that simple. Because government contracts require businesses to state they are in compliance with the laws listed here, and many others, submitting an invoice while not in compliance can be considered a false claim. This means if your product is not TAA compliant, despite your honest belief it is, then after certifying your product is TAA complaint every invoice you send the government violates the False Claims Act. Given the penalties can range from $11,000 per “false claim,” plus three times any damage the government sustained, AND possible criminal prosecution, you start to see why my previous Lord of the Rings reference is only slightly hyperbolic. One does not simply “be honest” and avoid the False Claims Act.

While reading this may panic any government contractor not previously aware of dangers, take some comfort in knowing that businesses with NO contracts with the government can also fall under the act’s fiery eye. Recently the civil suit of United States ex rel. Ryan Bliss v. Biocompatibles, Inc., et al., Case No. SA-13-CA-0667-XR, was resolved when AngioDynamics, Inc., a medical device manufacturer, agreed to pay 11.5 million for making false statements about its products to healthcare providers. Why does this involve the False Claims Act? Because even if not in direct contract with the government, a business is not permitted to sit from the comfort of its hobbit-home and blow smoke about its products to its customers that are selling to the government. AngioDynamics, Inc. knowingly made false statements to healthcare providers about its products whom then billed Medicare and Medicaid when they used the products, thus AngioDynamics caused those providers to submit false claims to the government.

While the reach and potential liability of the False Claims Act is demonstrated in the AngioDynamic settlement, contractors should also note how the case arose. AngioDynamic’s former employee receives $2.3 million for his part in blowing the whistle on the false marketing.

About the Author:

Tyler Freiberger
Associate Attorney
Tyler Freiberger is an associate attorney at Centre Law & Consulting primarily focusing on employment law and litigation. He has successfully litigated employment issues before the EEOC, MSPB, local counties human rights commissions, the United States D.C. District Court, Maryland District Court, and the Eastern District of Virginia.